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Exam 21: Corporate Earnings and Capital Transactions

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Question 1

Multiple Choice

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When the cumulative taxable income is higher than that reported on the financial statements, this gives rise to

A) a deferred income tax liability.
B) a deferred income tax asset.
C) Either of the above
D) Neither of the above.

E) All of the above
F) B) and D)

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Question 2

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When treasury stock is purchased, the Treasury Stock account is debited for the entire amount paid for the stock.

A) True
B) False

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Question 3

Multiple Choice

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Which of the following statements is correct?

The effect of issuing a stock dividend is to convert a portion of the corporation's ____________________ to permanent capital.

The worksheet for a corporation and a sole proprietorship are almost identical. The major difference is the

Both cash dividends and stock dividends decrease the total stockholders' equity.

Although the balance of the Retained Earnings account is decreased, a(n) ____________________ dividend will not result in a decrease in total stockholders' equity.

The Dividends Payable accounts appear on the balance sheet as ____________________ liabilities.

When the amount of future taxes that will be paid as a result of the MACRS depreciation deduction taken in this and prior years, an adjustment for the future taxes is made with a debit to

The entry to record the distribution of a stock dividend includes a credit to Common Stock Dividend Distribution.

Treasury stock is

Which of the following statements is not correct?

A corporation reported a net income of $200,000 for its fiscal year and declared and paid cash dividends of $90,000. A stock dividend recorded at $50,000 was also distributed during the year. If the ending balance of the Retained Earnings account was $300,000, calculate the beginning balance in the Retained Earnings account.

The effect of an event or transaction that is infrequent in occurrence and highly unusual in nature is shown as a(n) ____________________ item on the income statement.

The Topeka Corporation has 40,000 shares of $3 par value common stock outstanding. On July 1, the corporation declared a stock dividend payable July 31, 2014, to common stockholders of record on July 20, 2014, at the rate of one new share of common stock for each ten shares held. The estimated market value of the common stock is $36 per share. Record the transactions on page 15 of a general journal. Omit descriptions.

If a corporation receives a gift of land valued at $10,000 from a city, the accountant will record a debit to Land and a credit to ___________________.

The Retained Earnings Appropriated-Treasury Stock account is shown in the ____________________ section of the balance sheet.

A corporation reported a net income of $200,000 for its fiscal year and declared and paid cash dividends of $80,000. A stock dividend recorded at $40,000 was also distributed during the year. If the beginning balance of the Retained Earnings account was $60,000, calculate the ending balance in the Retained Earnings account.

The Treasury Stock account is shown on the balance sheet as

Selected transactions of the Streng Corporation during 2013 and 2014 are given below. Record the transactions on page 6 of a general journal. Omit descriptions.